Climate Public Expenditure

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CLIMATE PUBLIC EXPENDITURE AND

INSTITUTIONAL REVIEW (CPEIR)

Kathmandu

December 2011

Government of Nepal

National Planning Commission

United Nations Development Programme

United Nations Environment Programme

Capacity Development for Development

Effectiveness Facility for Asia Pacific

NEPAL

Govt. of Nepal


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DANIDA European Commission

Copyright2011

Government of Nepal




Capacity Development for Development Effectiveness Facility for Asia Pacific

All rights reserved. No part of this publicat ion may be reproduced, stored in retrievalsystem or transmitted in any form or by any

means electronic, mechanical, photocopying,recording or otherwise without prior permission of NPC/UNDP.

Citation: CPEIR (2011). Nepal Climate Public Expenditure and Institutional Review (CPEIR), Published by Government of

Nepal, National Planning Commission with support from UNDP/UNEP/CDDE in Kathmandu, Nepal

PEI Nepal BriefThe Poverty-Environment Initiative (PEI) in Nepal will support poverty reduction and inclusive development by

integrating pro-poor climate and environmental concerns into development planning and economic-decision making.The PEI is not designed as a stand-alone project as such but rather it aims to provide a programmatic framework for

targeted support to national and local level planning, budgetary and economic decision making processes through

ongoing UNDP supported programmes, in particular, Strengthening Planning and Monitoring Capacity of NPC (SPMC-

NPC) and the Local Government Community Development Programme (LGCDP). At the national level, the PEI will

help strengthen the NPCs capacity to integrate pro-poor climate and environment concerns in the national planning,

budgeting and monitoring processes. Similarly, at the local government level, it will provide technical support to the

Ministry of Local Development (MoLD), and select District Development Committees (DDC) and Village Development

Committees (VDC) to integrate pro-poor climate and environment priorities into local level planning and budgeting

process with a particular focus on rural infrastructure. The proposed timeframe for PEI in Nepal is 35 months from February

2010 to December 2012. The PEI Programme Framework will complement the existing project documents of the above

two projects, which will include the stipulated PEI activities in their respective Project Annual Work Plans (AWPs).

CDDE Facility BriefThe CDDE Facility was established in March 2009 to meet Asia and the Pacific partner country demand for peer-to-

peer initiatives that help them improve the management of their aid partnership in pursuit of development

effectiveness and poverty reduction. It is made possible with the financial support of the Asian Development Bank

(ADB), the Government of Japan, the Government of the Republic of Korea (MoFAT) and UNDP Asia-Pacific Regional

Centre in Bangkok, Thailand.

ISBN No. : 978-9937-8346-3-6

Published by:

Government of Nepal


Singha Durbar

Kathmandu, Nepal

Tel.: +977-1-4211629

Website: www.npc.gov.np


United Nations House

Pulchowk, Lalitpur

Tel.: + 977-1-5523200

PO Box 107

Kathmandu, Nepal

Website: www.un.org.np

www.undp.org.np

Capacity Development for Development

Effectiveness Facility for Asia Pacific (CDDE)UNDP Asia Pacific Regional Centre

U.N. Building, 3rd Floor

RajdamnernNok Avenue,

Bangkok, Thailand

Tel.: +662-304-9100, Ext 2723

email: [email protected]

http://www.aideffectiveness.org/cdde


UNEP Regional Office for Asia and the Pacific

U.N. Building, 2nd Floor, Block A

Rajdamnern Nok Avenue

Bangkok 10200, Thailand

Telephone: + 662- 288-1604

Website: www.unep.org


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NEPAL CLIMATE PUBLIC EXPENDITURE AND INSTITUTIONAL REVIEW (CPEIR)

Climate Public Expenditure and Instuonal Review (CPEIR) was conceived and conducted under the joint

leadership of the Naonal Planning Commission (NPC), the Ministry of Finance, and the Ministry of Environment

together with the Ministry of Local Development of the Government of Nepal (GoN). The study was carried

out by an expert team led by Neil Bird of ODI with support from Mark ODonnell, Public Financial Management

Expert, and Joyce Lee, Local Governance Expert. The other members of the team were Ram Chandra Bhaarai,

Financial Management Expert; Rabin Boga, Climate and Environment Expert; and Ek Raj Sigdel, Environment

Specialist of LGDCP. Overall guidance for the study was provided by Thomas Beloe and Paul Steele of the UNDP

Asia Pacic Regional Oce in Bangkok, together with Vijaya P. Singh, Assistant Country Director, and Dinesh Karki,

Environment Programme Analyst of the Environment, Energy and Climate Change Unit at UNDP in Kathmandu.

Krishna Gyawali, Secretary of the Ministry of Environment, and Yuba Raj Bhusal, Member Secretary of the

NPC provided much appreciated support and guidance. Joint Secretary and PEI focal point Gopi Nath Mainali,

Programme Director Manahari Khadka, and Planning Ocer Nita Pokharel of the NPC Secretariat, together with

Under-secretaries Hari Pandey and Tek Bahadur Khatri of Ministry of Finance, provided valuable support to the

study. Pushpa Lal Shakya, Joint Secretary of the NPC Secretariat and Naonal Programme Director; Rabi Shankar

Sainju, Programme Director of the NPC Secretariat and Project Coordinator; and Gyanendra Shrestha, Naonal

Project Manager; all of SPMC-NPC/UNDP deserve special menon for their connued support to the study.

Madhukar Upadhya provided professional support and managed a team of research assistants: Merina Ranjit,

Durga Bhaarai and Sujata Khanal. Anuja KC at the UNDP Kathmandu oce provided logiscal support to the

expert team as the study progressed.

Rameshore Prasad Khanal, Independent Consultant; Pushkar Bajracharya, Former Member of the Naonal

Planning Commission; and Madhav Prashad Ghimire, Former Auditor General of the GoN reviewed the dra

report and provided valuable comments to improve the document. Comments were also received from the

Associaon of the District Development Commiees Nepal (ADDCN). The study beneted substanally from the

suggesons and comments provided by the parcipants of the two workshops held during the study. All of them

deserve special appreciaon.

The preparaon of this report has been made possible through generous nancial support provided by all

PEI development partners: the Belgian Development Cooperaon, the Danish Ministry of Foreign Aairs, the

Capacity Development for Development Eecveness Faculty for Asia and Pacic, the European Commission,

Irish AidDepartment of Foreign Aairs, the Norwegian Ministry of Foreign Aairs, the Spanish Ministry of

Foreign Aairs and Cooperaon, the Swedish Environmental Protecon Agency, the Swedish Internaonal

Development Cooperaon Agency, the UK Department for Internaonal Development, and the US Department

of State. The support from these organizaons is duly acknowledged.

ACKNOWLEDGEMENTS

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Nepal is one of the most vulnerable countries to impacts from climate change. The errac weather

paerns, unpredictable rains, poor snowfall at high altudes, and recurrent droughts have adversely

aected agriculture and livelihoods adding further strain to small farmers and poor people. Climate

change has the potenal to damage already achieved development gains and undermine our future

possibilies and aspiraons. The Government of Nepal is commied to address the emerging issues of

climate change while delivering development results.

The nature of the climate threats facing communies across Nepal is diverse requiring locaon specic

understanding of the problem in order to plan appropriate responses. It is yet to be clear as to what

extent a parcular economic sector in a given geographical area will be impacted by climate change,

let alone appraising the eecveness of the investment needed for adaptaon. Hence, determining

investment priories for the future and allocang resources accordingly is a challenge for naonal

planners. This will require increased understanding among policy and decision makers about how cli-

mate change and the cost to respond to its impacts will be integrated with development planning and

investment proposions.

Findings of this study on the Climate Public Expenditure and Instuonal Review (CPEIR) provides agateway to climate nancing in development planning and helps build our understanding of the gaps

that must be addressed while responding to climate change issues. I believe that the recommenda-

ons of the study will help improve investment criteria and push us toward a pathway to set strategies

to adopt the course of acons for investment. Formulang the standards and codes for development

acvies as recommended, will facilitate climate expenditure review and monitoring climate acvies,

which will help improve the current nancial management by moving from input oriented tracking to

outcome oriented reporng.

I commend the eorts of all those involved in conducng the study and publishing this document.

MESSAGE

Deependra Bahadur Kshetry

Vice ChairpersonNational Planning Commission

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ADB Asian Development Bank

AEPC Alternave Energy Promoon

Centre

CCC Climate Change Council

CDM Clean Development Mechanism

(of the Kyoto Protocol)

DANIDA Danish Internaonal Development

Agency

DDC District Development Commiee

DFID Department for Internaonal

Development, UK

DLA District Line Agency

DRR Disaster Risk Reducon

DRM Disaster Rick Management

EU European Union

ESAP Energy Sector Assistance

Programme

FSF Fast Start Finance

GEF Global Environment Facility

GHG Greenhouse Gas

INGO Internaonal Non Government

Organisaon

JFA Joint Financing Arrangement

LB Local Body

MCCICC Mul-stakeholder Climate

Change Iniaves CoordinaonCommiee

MCPM Minimum Condions Performance

Measure

MLD Ministry of Local Development

MoE Ministry of Environment

MoF Ministry of Finance

MoU Memorandum of Understanding

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MRV Monitoring, Reporng and

Vericaon

NORAD Norwegian Agency for

Development Cooperaon

NGO Non Government Organisaon

LAPA Local Adaptaon Plan of Acon

LGCDP Local Governance and Community

Development Programme

NAPA Naonal Adaptaon Plan of

Acon

NDRRC Nepal Disaster Risk Reducon

Consorum

ODA Ocial Development Assistance

PFM Public Finance Management

PPCR Pilot Program for Climate

Resilience

REDD Reducing Emissions fromDeforestaon and forest

Degradaon

SAARC South Asian Associaon for

Regional Cooperaon

SPCR Strategic Program for Climate

Resilience

SREP Scaling-Up Renewable Energy

Program for Low Income

Countries

TYP Three-Year PlanUSD United States Dollar currency

UNDP United Naons Development

Programme

UNFCCC United Naons Framework

Convenon on Climate Change

VDC Village Development Commiee

WB World Bank

ABBREVIATIONS


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x

4.3 Idencaon of government climate change expenditure .........................................................33

4.4

Technical assistance ............................................................................................ ........................38

4.5 Overview of sources of government climate change funding .....................................................39

4.6 Analysis of government climate change expenditure .................................................................41

4.7 Private Sector (including community and co-operaves) climate change expenditure ..............51

4.8 Climate change expenditure through NGOs ...............................................................................51

4.9 Issues and recommendaons .....................................................................................................53

Chapter 5: Assessment of climate change public nance management ..................................56

5.1 Introducon ................................................................................................................................56

5.2 Budget formulaon and approval process ..................................................................................56

5.3 Budget implementaon ..............................................................................................................57

5.4 Financial management instuonal arrangements ....................................................................58

Chapter 6. Local government instuonal capacity and expenditure management................60

6.1 Local government in nepal ..........................................................................................................60

6.2 Local stakeholders perspecve of climate change .....................................................................61

6.3 Translang naonal climate policies into local planning .............................................................62

6.4 Instuonal arrangements at the local level ..............................................................................62

6.5 Sources of climate nance and naonal-to-local funding modality ............................................64

6.6 Civil society and the private sector .............................................................................................67

6.7 Issues and Recommendaons .....................................................................................................68

References....................................................................................................................... ......72


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List of Tables

Table 1: Dening Climate Change ................................................................................................................. 2Table 2: Subsidies for Micro Hydro Power ....................................................................................................8

Table 3: Subsidies for Biogas Plants ..............................................................................................................8

Table 4: Priorized Programs under NAPA .................................................................................................13

Table 5: Development Partner support for climate change in Nepal ......................................................... 27

Table 6: Summary Data Sources .................................................................................................................29

Table 7: Contextual Overview of Government Budget and Funding Sources .............................................30

Table 8: Government Expenditure and GDP (2007 Prices) .........................................................................30

Table 9: Proporon of Funding of Government Budget 2007/08 to 2011/12 ............................................31

Table 10: Government Budget Execuon 2007/08 to 20011/12 ................................................................31

Table 11: Funding of Actual GoN Expenditure 2007/08 to 2009/10 (Rupees Millions) ..............................31

Table 12: Funding of Actual GoN Expenditure 2007/08 to 2009/10 (%) ....................................................32

Table 13: Climate Change Budgets and Expenditure Key Line Ministries ................................................34

Table 14: Criteria for the Categorisaon of Programs within Ministries ....................................................35

Table 15: Budgeted Expenditure on Relevant Programs 2007/08 - 2011/12 .............................................36

Table 16: Climate Change Financing in Nepal (Ongoing and Pipeline) .......................................................39

Table 17: Source of Funding: Climate Change Programs 2007/08 to 2011/12 (NR 000) ............................40

Table 18: Source of Funding: Climate Change Programs 2007/08 to 2011/12 (%) .....................................40

Table 19: Number of Relevant Codes Analysed by Ministry .......................................................................41

Table 20: Relevant Codes Budgeted Expenditure and Actual Expenditure ................................................41

Table 21: Analysis of Relevant Climate Expenditure and Budgets (By Ministry).........................................43

Table 22: Climate Change Acvity within Key Ministries ............................................................................44

Table 23: Budget Analysis: Adaptaon v Migaon ...................................................................................44

Table 24: Local Component of Relevant Climate Change Expenditure .......................................................45

Table 25: Line Ministry Climate Change Budgeted Expenditure at Local level ...........................................46

Table 26: Signicant Spending Ministries at Local level .............................................................................47

Table 27: Analysis by Economic Classicaon ............................................................................................48

Table 28: Analysis of Recurrent Expenditure and Budgets .........................................................................48

Table 29: Economic Analysis by Code .........................................................................................................48

Table 30: Climate Change Expenditure By Budget Priority .........................................................................49

Table 31: Government Priority Two Expenditure .......................................................................................49

Table 32: Analysis of Climate Change Spend By Government Strategy ......................................................50

Table 33: Expenditure by the Private Sector (including communies and cooperaves) ..........................51

Table 34: Climate Change Expenditure through NGOs ............................................................................... 52

Table 35: Local Bodies' Locally Generated Revenue (Internal Sources) ......................................................65


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List of Figures

Figure 1: Comparison of dierent areas of climate expenditure ..................................................................3

Figure 2: The 2009 Sagarmatha Declaraon ................................................................................................5

Figure 3: Instuonal arrangements for the implementaon of REDD programs ..................................... 21

Figure 4: Government of Nepal Classicaon Chart ..................................................................................45

Figure 5: Central funds ow to Local Bodies .............................................................................................. 65

Figure 6: Central Government to DLAs .......................................................................................................66

Figure 7: Central natural disaster relief commiee .................................................................................... 67

List of Charts

Chart 1: Sources of Government funding 2007/08 to 2011/12 ..................................................................30

Chart 2: Budgeted climate change expenditure 2007/08 to 2011/12 ........................................................36

Chart 3: Climate change budget increase versus non climate change budget increase .............................37

Chart 4: Climate budget as a proporon of Government budget ..............................................................37

Chart 5: Sources of climate change funding 2007/08 to 2011/12 ..............................................................40

Chart 6: Relevant Codes Budgets and Actual Expenditure (NRs. 000)......................................................42

Appendices

Appendix 1: Review of project documentaon - case example .................................................................73

Appendix 2:List of climate change administrave codes ............................................................................ 74

Appendix 3: Summary of Government of Nepal Technical Assistance as at September 2011 ...................77

Appendix 4: Basis for priorizaon criteria for development program/projects .......................................78

Appendix 5: Annual Plan formulaon process in Nepal .............................................................................83

Appendix 6: District Level annual planning process (as per the Local Self Governance Act) ..................... 84

Appendix 7: Program and budget nalizaon process ...............................................................................85

Appendix 8: Funds ow mechanism in Nepal ............................................................................................86

Appendix 9: Guidelines provided by NPC for the preparaon of Plan and Budget ....................................87

Appendix 10: Priorisaon calculaon for development projects .............................................................89

Appendix 11: Base of priorizaon of ordinary and administrave expenditure ......................................90


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The climate change policy recognizes the role of communies, the private sector, civil society and the media in

ensuring mul-stakeholder parcipaon in climate change iniaves and envisions the development of various

incenve mechanisms to facilitate their parcipaon and partnership. However, some NGOs accuse Governmentthat the voices of naonal organizaons are not properly recognized in the present debate on the naonal

response to climate change rather decisions are made under the inuence of internaonal organizaons.

The instuonal response to climate change

Strengthening of climate change management capacies within key instuons has begun. This capacity

building is geng underway at both naonal and local levels, and within vulnerable sectors and populaon

groups. Projects are supporng the strengthening of capacies and instuons to integrate climate change risk

management into development planning. However, much more needs to be done; the challenge is to idenfy

and address the early strategic priories.

Whilst the Ministry of Environment (MoE) leads on climate issues and coordinates donor funded programs atthe naonal level, there are a considerable number of climate change-related programs carried out by sector

ministries under their regular programs that do not get reected by the MoE. In addion, many NGOs implement

acvies that address climate change issues, but these programmes are only recorded at the Social Welfare

Council. Therefore, actual climate acvies may be much larger than what is reected in the regular government

programs. However, there sll remain gaps in addressing climate concerns. Perhaps the most visible gap is that

the exisng instuonal structure does not support VDC level climate programmes. For example, if a VDC wants

to make its water supply project climate resilient or plan for a climate resilient educaon programme, there is

no instuon that it can presently approach.

There is also the challenge of instuonal collaboraon to overcome. For example, one of the Ministry of

Forests and Soil Conservaons departments is the department of watershed management. This department

implements acvies in priority sub-watersheds. In the current TYP the department intends to implementprograms based on the river basin approach. However, it has no working relaonship with the Ministry of

Irrigaon, which also wants to develop river basin programs. Forests and agriculture are also closely linked

within any one geographical area, but none of the ocial programs of these sectors have a common thread that

would help build synergy while addressing climate change.

There are challenges for both the public and private sectors as they develop programs that address climate

change. For example, although there is external support for Clean Development Mechanism (CDM) projects,

there is a gap in naonal support for CDM projects in the agriculture, livestock and forestry sectors. The exisng

capacity of climate related ministries and their departments are not enough to develop CDM projects, including

the methodology for calculang the amount of carbon sequestraon. CDM project requirements are stringent

and CDM projects in forestry, agriculture, and waste are more complex and require extensive monitoring

compared to alternave energy CDM projects. Inadequate awareness among policy makers and industrialists,

weak instuonal capacity, inadequate resources, and lack of baselines are the major limitaons.

Climate change expenditure analysis

There is no single denion of climate change-related expenditure. A wide range of terms are used including

climate change expenditure, climate related expenditure, climate resilience expenditure, climate driven

expenditure, climate induced expenditure and climate sensive expenditure. In each case the word expenditure

may be substuted by acvity. This situaon makes idenfying the disncons between each type of acvity

and expenditure, and therefore the intended outcomes, very dicult.


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Within the Government Classicaon Chart there is lile explicit recognion of climate change-related

expenditure. Nevertheless, this study has idened 83 budget line codes with Governments Red Book as being

relevant to climate change; 33 of these codes are considered highly relevant. In terms of the number of climatechange-related acvies, the highest number of relevant codes, and therefore discrete acvies, fall under the

Ministry of Forests and Soil Conservaon; in terms of expenditure, the highest spending ministry is Physical

Planning and Works.

The level of climate change-related expenditure by the Government of Nepal is economically, nancially and

managerially signicant, as evidenced by:

Annual expenditure on all climate change-related acvies constutes approximately 2% of Gross

Domesc Product (GDP) and around 6% of Government Expenditure. In both cases the trend is increasing.

Highly relevant budgeted expenditure represents around 1.8% of total Government Budgeted

Expenditure.

Around three quarters of climate change expenditure relates to adaptaon acvies.

Around 60% of the climate change expenditure is executed directly by Central Government Agencies,

with 40% of the naonally controlled budget being executed through Local Agencies of Ministries. This

is largely driven by Uncondional Capital Grants and programmes in the Ministry of Local Development.

Funding of government climate change expenditure has a larger proporon of donor funding (55%) than the

donor element of overall government expenditure, where 25% of the overall budget is funded by donors. The

trend in climate change funding is moving towards increased donor funding. A signicant sum of Technical

Assistance, in the order of about USD 13 million per year, in respect of climate related expenditure is not budgeted

or accounted for through government systems, (i.e. is o-budget). This contributes to a fragmentaon of

budget implementaon and hinders full co-ordinaon of expenditure to facilitate the best eect in terms of

outputs and outcomes.

Adding to the challenge of understanding climate change-related expenditure is the fact that there is no common

reporng system or budget / expenditure classicaon between central government, local government and

donors. This posion adds to a fragmented record of nance which could be addressed by the use of a common

chart of accounts. In the short term, this makes the aim of idenfying expenditure, both budget and actual,

technically challenging.

Naonal-to-Local issues

In line with the key ndings at the naonal level, there is an absence of a coherent denion and classicaon

of climate change and climate change-related expenditure at the local level. This has a signicant impact on

how local government bodies integrate climate change into their local development planning and budgengand what they perceive as sources of climate nance. Local bodies understanding of climate change is skewed

towards environment and natural resource management, which gives more aenon to rural needs. A balance

needs to be found to ensure that both rural and urban vulnerabilies are addressed. Although there is a good

understanding of disaster risk management at the local level, its relaonship with climate change has not yet

been made.

Some local government bodies have incorporated climate change into their local plans and budgets. However, in

the absence of a consistent climate change denion, climate related acvies are not clearly dened at the local

level. There is also a challenge of how naonal policies are going to be reected and translated into acon at the

local level to ensure that climate change is mainstreamed and instuonalised into local development planning


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and budgeng systemacally across all local bodies. While instuonal arrangements at the naonal and local

level are in place to support local bodies on addressing climate change, the challenge will be to strengthen their

capacity and inuence to deliver climate nance using a cross-sectoral approach.

One of the most signicant issues is how Nepal can meet the ambious target of delivering and spending 80% of

its adaptaon nance at the local level. There are current challenges to local capacity on the understanding of

climate change; on ability to develop clear and targeted programmes and budgets on climate change adaptaon

and migaon; on capacity in public nancial management to handle signicant amounts of climate nance;

and on the eecveness of current instuonal arrangements to support all ers of local bodies, including those

at the village and ward level. Policies and commitments on climate change need to be more realisc and reect

current capacity, parcularly technical capacity, at the local level.

Issues that require further aenon

Dening climate change expenditure: addressing the issue of dening each category of climate change-relatedexpenditure requires aenon at both the naonal and internaonal level. In this respect, an update of naonal

and internaonal classicaon standards of public expenditure to incorporate terminology in respect of climate

change should be seen as a high priority. Consideraon should also be given to establishing a naonal budget

coding system that tracks themac climate change-related expenditure.

Capital expenditure and asset management: the apparent large percentage of climate change spend on the

creaon of xed assets brings into focus the need for emphasis on improved asset management to ensure

sustainable eecveness of the assets created. As with wider governance risks this could readily be designed

as an integral component of Technical Assistance and Investment projects. The rapid growth in climate change

expenditure presents obvious governance, control and eecveness risks as systems of management are placed

under strain dealing with rapid change. This should be recognised at project and acvity level and governance

risk migaon capacity building procedures designed as integral components of project design.

Delivering climate nance to the local level: the MLD grant funding modality should be considered to channel

climate nance to local bodies. It promotes both naonal and local ownership and gives some discreon on

spending, which is crically important in the context of targeng vulnerable communies and high-risk areas. A

possible starng point is to integrate climate change as an indicator of, or a component in, the MCPM system.

Currently, there is a proposal to support the review of the MCPM manual of local bodies to include pro-poor,

climate and environmental sensive indicators as a performance measure and condion for accessing future

grants. While there are already eorts made, more could be done to arculate the need for climate change

adaptaon and migaon in all guidelines relevant to local bodies, in all relevant sectors.

Empowering local level delivery: it is important to secure the right structures at the local level to ensure that the

ow of climate nance reaches the most vulnerable communies. This will require the creaon of signicantnew capacity within exisng district level structures. Mechanisms therefore need to be developed to improve

local instuonal capacity and accountability to implement climate change programmes. In this regard, there

is a need to understand and strengthen the role of the Energy and Environment Units within DDCs as it is

envisaged that they will play a big role in coordinang climate change-related acvies at the local level.

The need for a sector-led approach: climate resilience needs to be integrated into all aspects of naonal

development, with a strong mainstreaming programme facilitated by the Ministry of Environment. However,

it is important that each line ministry takes the lead in integrang a climate change response within its sector


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policy. This sector-led approach needs to be reected by increased nancial and human resources at sector level

specically for climate change-related acons. Such acons should be reected in the naonal budget. Some

consideraon should be given by government to establishing separate and explicit climate change idenes foradministrave units within Ministries that deal with climate change issues.

Strengthening naonal coordinaon: aenon needs to be given to secure inter-sector coordinaon as there

are many across-sector impacts of climate change. To assist this coordinaon eort, the MCCICC (as the major

naonal forum on climate change) could be strengthened through a more formalised way of working to achieve

enhanced coordinaon at the technical level, including the holding of regular meengs with formal records.

It would be benecial to have the MCCICC meeng record fully in the public domain through a dedicated

website (as is now standard pracce with such meengs at the internaonal level). Civil society organizaons,

in parcular, have a strategic role to play in responding to climate change issues. With increased government

support, NGOs, federaons and networks on natural resource management, such as FECOFUN, could play a

signicant role in community awareness and educaon on climate change.

Internaonal support: development partners have recognised the need for harmonizaon and coordinaon

of their eorts through the 2009 Donor Compact. Building on this compact now appears to be the challenge.

A signicant medium to long-term challenge for Nepal is the issue of the nancial sustainability of current

levels of expenditure directed at climate change acons. The contribuon by donors (presently more than

50%) highlights the need for a long-term nancing framework to be established. Such a framework would

almost certainly include mul-stream funding from both domesc and internaonal sources. A second issue

concerning internaonal support is that consideraon should be given by Government to establishing further

processes to ensure compliance with the Ministry of Finance requirements to record Technical Assistance on the

Aid Management Plaorm. By extension, consideraon should be given to establishing a full record of Technical

Assistance within the Red Book to ensure recognion of all aspects of Government expenditure within Country

Systems. This iniave would enhance the ability to idenfy climate change expenditure and funding more fully

and accurately.


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2

The methodological approach taken for

the study involved the compilaon of

relevant documentaon on climate changepolicy, the instuonal framework and

public expenditure on climate change

derived from ocial sources and from

various public documents. In addion,

individual semi-structured interviews

with key informants were completed to

idenfy key areas for further analysis.

The research was largely carried out at

the naonal level, but the local analysis

was enhanced by eld visits to Dhading

District Development Commiee (DDC)

and the Kathmandu Municipality. Two

workshops were held during the research

period where the methodology and inial

results were shared with an audience

of government ocials and civil society

representaves. This methodology takes

into account the relavely recent beginning

of the discussion on climate related policy,

planning and budgeng within Nepal and is

therefore largely exploratory in character.

Table 1:DeningClimateChange

1. Migaon

OECDDenion: An acvity should be classied as climate change migaon related if it contributes to the objecves of stabilisaon of

greenhouse gas (GHG) concentraons in the atmosphere at a level that would prevent dangerous anthropogenic interference with the

climate system by promong eorts to reduce or limit GHG emissions or to enhance GHG sequestraon(OECD, 2011)

Sector Example actvites

ForestryProtecon and enhancement of sinks and reservoirs of GHGs through sustainable forest management,

aorestaon and reforestaon

Water and sanitaon Methane emission reducons through waste management or sewage treatment

Energy

GHG emission reducons or stabilisaon in the energy, transport, industry and agricultural sectors through

applicaon of new and renewable forms of energy, measures to improve the energy eciency of exisng

machinery or demand side management (e.g. educaon and training)

Transport

Industry

Agriculture

2. Adaptaon

OECDDenion: An acvity should be classied as adaptaon-related if it intends to reduce the vulnerability of human or natural systems

to the impacts of climate change and climate-related risks, by maintaining or increasing adapve capacity and resilience (OECD, 2011).

Sector Example actvites

Enabling acvies Supporng the development of climate change adaptaon-specic policies, programs and plans

Policy and legislaon Capacity strengthening of naonal instuons responsible for adaptaon

Agriculture Promong diversied agricultural producon to reduce climate risk

EnergyStrengthening of energy transmission and distribuon infrastructure to cope with the expected impacts of

climate change

ForestrySecuring local rights and systems for the sustainable and long-term ulisaon of the forest in order to increase

resilience to climate change

Health Strengthening food safety regulaons; developing or enhancing monitoring systems

TransportBuilding protecon from climate hazards into exisng transport infrastructures (e.g. Disaster Risk Reducon

measures)

Water and sanitaon Monitoring and management of hydrological and meteorological data

Source: Handbook on the OECD-DEC climate markers. Preliminary version. OECD, 2011


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1.2 Climatechangeandclimatenancedened

Climate change

The approach that has been developed in

Nepal looks at how public expenditure is

directed at climate change related acons

in contribung to either (i) migaon or

(ii) adaptaon (Table 1). Two main areas

of climate change migaon acvity have

been idened: REDD2 and clean energy

investments. For adaptaon acvies, thespending of a select set of sector ministries,

departments and programs have been

analysed to idenfy costs that may be

aributed to climate related expenditure.

Figure1:Comparisonofdierentareasofclimateexpenditure

Increasing prominence of development objecves as the primary

purpose for the expenditure

Migaon

energyMigaon

-forests

Adaptaon-

narrowly

defned Adaptaon-broadly defned

Increasingdifculty

inaribungclimatechangeimpact

Climate nance

As most recently re-stated within the 2010

Cancun Agreements, climate nance has

been dened within the context of the

UNFCCC negoaons. Much emphasis

is given to climate nance being new

and addional, of it being adequate and

predictable and to dening the expected

levels of internaonal nance to be made

available to developing countries over

both the short to medium-term. What is

clear is that climate nance is needed tomeet the addional costs brought about by

climate change. These incremental costs

will be incurred by most sectors of the

economy and will aect both investment

programs and the recurrent expenditure of

2 Reducing Emissions rom Deorestation and Forest Degradation


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4

government spending. The challenge is to

idenfy the level of top up required for

each sector and then ensure an eecvemechanism is in place so that this level of

nance can be measured. This is proving,

in pracce, a very dicult endeavour.

Climate nance represents a very

signicant mainstreaming challenge for

public nance management and can be

likened to a new funding stream across

the whole of the naonal budget. The

administraon of climate nance thereforecalls for a prominent role to be played by

the Ministry of Finance. It also suggests

that a projecsed approach to climate

change will likely not be the most strategic

route to take; rather a revision of the public

sector nances will be required. This

represents a very considerable challenge

for a country such as Nepal where much

development eort has focused on project

acvity at the sector (and sub-sector) level.

Without an internaonally recognised

denion of climate expenditure there are

no clear boundaries to such spending. This

represents a major challenge for any study

of climate nance. Figure 1 portrays some

of the components of climate nance

in terms of the prominence given to

developmental objecves when planning

the expenditure (what are oen called the

co-benets of such spending) and thediculty in aribung the climate change

impact of such expenditure.

What Figure 1 suggests is that some

elements of climate expenditure will be

easier to idenfy than others. A response

to such a situaon is simply to accept there

will be varying levels of condence that

can be placed on dierent esmates of

expenditure.

1.3 Structureofthereport

Aer this brief introducon, the rest of the

report focuses on the core aspects of the

study:

Chapter 2 examines the status of

policy and planning for climate

change;

Chapter 3 describes the instuonal

arrangements for climate change;

Chapter 4 details the results of the

teams climate change expenditure

analysis;

Chapter 5 describes public nance

management as it relates to climate

change; and

Chapter 6 examines issues of local

government instuonal capacity andexpenditure management.


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TheGovernmentofNepal:

1. Expresses its commitment to form an alliance with all concerned states including the South Asian naons to save the Himalayas

and the mountain ecosystems, which are at risk caused by climate change and to draw the aenon of the global community

to the issue;2. Commits to engage in the research and analysis of, and launch awareness campaigns at the local and naonal levels on, the

adverse impact on local livelihoods and life-support systems caused by climate change in the Himalayan region and other

related areas especially to poor, marginalized groups, ethnic and indigenous people, Dalits (oppressed) women and children;

3. Makes every possible eort to develop an early warning system, forecast modelling of climate change to respond to the negave

eects of climate change and also to increase resilience in agriculture and other sectors as well as capacity development

measures;

4. Declares to expand the coverage of protected areas from the exisng 20% to 25%; and also to increase the forest cover up

to 40% of the total landmass, in view to protecng the mountain ecosystem. In a bid to galvanize our commitment to these

protecon measures, further declares Gaurishankar and Appi-Nappa conservaon area;

5. Seeks funding from the internaonal community so as to eecvely implement the Naonal Adaptaon Program of Acon,

which has been developed with the objecves of dealing with the adverse eects of climate change on Nepal's socio-economic

sector especially water resources, agriculture, bio-diversity, forests, human life and human health. Also it endorses the proposal

to make a contribuon by developed countries equivalent to 1.5% of their GDP to the climate change Adaptaon Fund;

6. Draws the aenon of developed and neighbouring states for the development and easy transfer of appropriate and state-of-

art technologies and investment, believing that the development of clean energy in Nepal would contribute to reduced carbon

emissions in this region;

7. Urges to reframe the provisions of the Clean Development Mechanism so that Nepal and other poor and least developed

countries would be able to receive the full benet from this mechanism;

8. Emphasizes that the atmospheric concentraon of greenhouse gases (GHG) must stabilize well under 350 ppm and the global

average surface temperature increase should be limited to 1.5 degree Celsius above the pre-industrial level;

9. Highlights the importance of enhanced research on mountain ecosystems, snow and glacier melt processes in order to full the

crical knowledge gaps;

10. Appeals to the internaonal community to migate the signicant adverse impacts on mountain ecosystem and the Himalayas

caused by greenhouses gases. It also draws the aenon of the enre world community to provide relief to the adversely

aected poor naons and peoples by compensang them from the greenhouse gas eming countries.

Figure2:The2009SagarmathaDeclaraon

CLIMATE CHANGE POLICY ANALYSIS

CHAPTER 2

2.1 Nepalsposiononclimatechange

The Government of Nepals policy on

climate change made rapid progress

immediately prior to the 15th Session of the

Conference of the Pares (COP 15) to the

UNFCCC, which was held in Copenhagenin 2009. In July 2009,a Climate Change

Council was established under the chair

of the Rt. Hon. Prime Minister and in early

December, immediately before the COP 15

meeng, a Cabinet Meeng was organized

at Kalapahar near the Mt. Everest Base

Camp. This Cabinet Meeng issued the

Sagarmatha Declaraon on Climate

Change as a symbolic gesture to draw the

worlds aenon to the impact of global

warming in the Himalayan region. The

government expressed its commitment

to tackle climate change and idened

several themes for priorised acon,

including fostering sustainable economic,

social and cultural development and the

conservaon of biological diversity. The

Declaraon set naonal policy priories


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for addressing climate change, with a focus

on capacity building,expanding ecological

protected areas, the implementaon of anaonal adaptaon response, developing

clean development mechanism projects,

and enhancing research and relief to those

adversely aected, parcularly the poor.

the poor.

With regard to the nancing of climate

change acons, this statement of naonal

policy highlights, in paragraph 5, the

importance of internaonal nance to

supplement naonal resources (parcularlyfor adaptaon measures). There is also

recognion of the role to be played by

the private sector and innovave sources

of funding for migaon acvies, with

the reference to the Clean Development

Mechanism in paragraph 7. The naonal

response to climate change is therefore

expected to depend on a mix of nancing

sources, domesc and internaonal, public

and private.

2.2 Naonalpolicyprocesses

2.2.1 TheInterimConstuon

The Interim Constuon (2007) recognized

the right to live in a clean environment

for every individual. In recognion of this

basic right, the states responsibilies

were seen to include the conservaon and

management of natural resources and the

implementaon of scienc land reform

programs, consistent with commitments

made in those mullateral agreements

of which Nepal was a party. The Interim

Constuon adopted policies to maintain a

clean environment and to avoid the adverse

eects of physical development acvies

on the environment. However, there is no

explicit menon of climate change in the

Interim Constuon, signaling that climate

change had yet to be recognized as a major,

long-term public policy concern.

2.2.2 TheNewConstuon

According to the Constuent Assembly

Rules (2008), themac commiees in

the Constuent Assembly (CA) are to

be constuted to prepare preliminary

dras on subjects to be incorporated

in the New Constuon. One of thesethemac commiees is the Commiee

on Natural Resources, Economic Rights

and Revenue Sharing. This commiee

recognizes the role of biodiversity as a

major source of livelihood that requires

inter generaonal equity. In order to signal

the need to maintain a balance between

the conservaon of natural resources

and economic development, sustainable

management and use of naturalresources, and biodiversity conservaon

will be included in the preamble of the

Constuon. The CA commiee has also

concluded that it is the States responsibility

to maintain 40 percent forest cover in the

country.

The commiee recognizes the serious

problem that climate change has created

and has therefore recommended that the

New Constuon should adopt policies

to address climate change. These include

implemenng adaptaon and migaon

measures, as well as fullling naonal

commitments made within internaonal

convenons.


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8

2.2.5. Subsidy Policy for Renewable

RuralEnergy,2009

This recent policy instrument recognizes

the considerable potenal of alternave

energy sources in Nepal. The policy looks to

maximize service delivery eciency in the

use of renewable energy in rural areas and

to provide opportunies for low-income

households to use renewable energy

technologies. In addion, it supports

the development and extension of such

technologies by aracng private sectorentrepreneurs. Subsidies are oered for

micro-hydropower, solar energy, biogas,

improved water mills, improved cooking

stoves, wind energy and other renewable

energy systems. Overall, this representsa well developed and sophiscated policy

measure promong a strategic climate

change strategy.

Subsidies for Micro Hydro Power (MHP)

The new subsidy for micro hydro power

is based on the number of households to

be served. This is to ensure that a high

number of households in each communitybenet from this power source, thereby

making the policy inclusive (Table 2)

Table 2:SubsidiesforMicroHydroPower

No. MicroHydroPowerprojects/

schemes

Subsidyamountper

household

(NRs)

Ceilingforthesubsidyper

kWgenerated

(NRs)

Remarks

1 New MHP project up to 5 kW 12,000 97,500

2 New MHP project above 5 kW

and up to 500 kW.

15,000 125,000

3 Rehabilitaon of MHP projectsof more than 5 kW

50% of the installaoncost

62,500

4 MHP to be installed for

instuonal and community use

97,500 (total)

(for plants up to 5kW

capacity)

30,000 Projects located in Karnali

Zone and adjoining areas get

NRs 30,000

6 For producve use ofEnergy,MHP with the business plan.

Addional nancial

support NRs 10,000

per kW

Not exceeding NRs 250,000

per project

MHP should be in operaon

for more than 6 months for

eligibility.

Table 3:SubsidiesforBiogasplants

No. Districtdescripon Subsidyrateperplant(NRs)

AddionalsubsidyforPoor,Dalit,

DepressedandConictAectedFamilies(NRs)

1 20 Tarai Districts with excellent accessibility 9,000 2,000

2 40 Hill Districts with road access 12,000 2,500

3 15 Hill Districts without road access 16,000 3,500

4Addional subsidy for Hill District with low

penetraon700 -

5 Addional subsidy for small capacity plants 700 -


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Subsidies for Biogas plants

Government has also recognized that

biogas has an important role to play in

the supply of domesc energy to rural

households. The subsidy policy targets

households within dierent physiographic

zones by oering dierenal subsidy rates

(Table 3). The Government has also made

the commitment to revise these subsidies

to accommodate year-on-year inaon.

The subsidy varies from 20 to 40 percent

depending upon the plant size, remotenessof the area, and economic status of the

beneciaries.

2.2.6. ClimateChangePolicy,2011

A new climate change policy was approved

by the Government of Nepal in January

2011. The policy builds on previous

experiences, especially major strategic

decisions made between 2007 and 2010,

including global commitments. The policyrecognises a range of problems confronng

the naonal response to climate change,

including: inadequate informaon on

the eects of climate change and its

consequences in dierent sectors; lack

of appropriate technology to migate,

reduce and adapt to climate change;

lack of nancial and human resources to

implement climate responses; and lack

of a policy framework to accommodate

commitments and decisions in response to

internaonal convenons and declaraons.

The policy reects the naonal vision in

terms of climate-friendly, socio-economic

development. It also signals the intent to

take full advantage of the internaonal

climate change regime in implemenng

naonal policies and plans. However, whilst

this policy is comprehensive in many ways,

it does not provide the details required

to dene a climate nance framework forNepal. The policy is silent on such issues

as the dierent sources of nance, the

governance arrangements of nancial

transfers (parcularly those unpinning the

policy posion of 80 percent of climate-

related expenditure to be spent at the local

level), and the expected scale of nancing

required.

2.3. Naonallegislaon

There is no naonal legislaon that

explicitly addresses the regulatory response

to climate change. However, there are

various Acts related to environmental

concerns that are relevant to any climate

change strategy. These include:

Naonal Parks and Wildlife

Conservaon Act, 1973

Soil and Watershed Conservaon

Act, 1982

Water Resources Act, 1992

Forest Act, 1993

Environment Protecon Act, 1996

Local Self Governance Act, 1999

The Environment Protecon Act enacted

in 1996 is the umbrella legislaon forenvironmental protecon in Nepal. This Act

aims to ensure sustainable development

through the integraon of environment

and development, the sustainable use

of natural resources, and the creaon of

a clean and healthy environment for all

people in Nepal.


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It is noteworthy that all the above primary

legislaon is more than ten years old,

reecng the period of polical turmoilthat has existed over that me. With

the naonal Peace Process just resolved,

there has been very lile polical space

for the naonal legislature to consider

new Statutes. This is reected in the

delayed authorizaon by Parliament of the

annual Appropriaon Act that approves

the government budget. Under such

circumstances, the legal reform process

is severely hindered and this may help

explain why climate change policy and

strategy processes remain unsupported by

any explicit legal Statute.

2.4. Naonalstrategyprocesses

2.4.1.The Three-Year Plan, 2010/11-

2012/13

The three-year plan (2010/11-2012/13)

(TYP) was formulated within a long-termvision of transforming the country from

Least Developed Country status to that of a

developing country. The TYP strategy places

importance on generang employment

opportunies, reducing poverty, improving

food security and addressing the challenges

of climate change. The strategy idenes

the climate change challenges that the

country is facing, priorises the key sectors

and proposes programmac acvies.

Local Bodies are to be given resources and

responsibilies through strengthened local

self-governance, and the preparaon of

devoluon acon plans prepared by sector

ministries in coordinaon with the Ministry

of Local Development. Some of the sector

strategies that are idened as addressing

climate change issues are described below.

Agriculture and food security

The agricultural sector strategy is to develop

climate change resilient technologies and to

disseminate the conservaon, promoon

and ulizaon of agricultural biodiversity.

The idened acons to implement

the strategy are: (i) community-based

agricultural biodiversity conservaon;(ii)

the development of appropriate

technology and infrastructure for the

conservaon and ulizaon of indigenous

knowledge and natural resources; (iii)encouragement of producon based on

agricultural biodiversity and employment

and income generang acvies; and

(iv) promoon of market centers and

entrepreneurship. Considering the

considerable food insecurity that climate

change may invoke, a signicant increase

in public spending on agricultural support

systems now looks necessary.

Forestry and watershed management

The TYP acknowledges that forests are

instrumental in reducing the negave

impacts of climate change and assisng

the adaptaon of the human ecosystem

to a changing environment. The TYP has

set important milestones and concrete

targets, including a minimum of 40 percent

of the total land area of the country to

be maintained as forests. It also sets in

place the necessary framework for the

management and distribuon of potenal

income that accrues from climate change-

related acons, such as the model

programs that have been launched for the

generaon of nancial resources under the

REDD concept. Vulnerability assessments

will also be conducted to assess the

potenal risks due to climate change and


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appropriate adaptaon programs will be

launched to manage such risks (which

will likely require considerable new publicinvestment).

Hydropower and alternave energy

The strategic goal in the TYP for hydropower

is to make hydropower projects sustainable

and cost eecve by making them

environment friendly and responsive to

climate change. The work program for

developing climate change responsive

projects includes adopng a river basin

approach for the design and construcon

of hydropower projects. In addion, based

on the success in generang income

through biogas projects under the Clean

Development Mechanism (CDM), the

TYP iniates the development of micro-

hydro schemes as a CDM project acvity.

In addion, improved cooking stoves,

improved water mills and solar systems

are under process of being registered withCDM. Alternave energy is now a priority

for both government and donor agencies

due to its importance as a climate change

migaon strategy.

Most climate change-related acons within

the TYP appear to be centred on natural

resource management. This represents

a starng point for the mainstreaming of

climate change concerns across dierent

sectors (e.g. agriculture, forestry, energy);however, it is a restricted view, as climate

change will impact the whole economy,

including the social sectors of health and

educaon. The challenge lies in the uptake

of climate change concerns in these other

sectors of the economy and the provision

of nancial and other resources to allow

for appropriate responses to be made.

2.4.2. ForestSectorStrategies

The Ministry of Forests and Soil

Conservaon is in the process of preparing a

mul-stakeholder Forestry Sector Strategy.

Building on the experiences of over twenty

years experience in the forestry sector

supported by dierent donors, the ministry

developed a Mul-Stakeholder Forestry

Programme (MSFP) in 2011, which is in

the process of approval. The MSFP has

idened the role of forestry in helping

Nepal adapt to climate change and migateits impacts. The indicave total budget for

the MSFP is esmated at USD 150 million

over a ten-year period. The MSFP intends

to reduce climate vulnerability of 550,000

households naonwide.

Reducing Emissions from Deforestaon

and Degradaon (REDD)

Nepal is one of 37 developing countries

beneng from the Forest CarbonPartnership Facility (FCPF), which focuses

on reducing emissions from deforestaon

and forest degradaon (REDD).The MFSC

has established a REDD Cell to formulate

REDD strategy opons. Dierent benet

sharing mechanisms at the local level

are being piloted in various parts of the

country by using a payment for ecosystem

services approach.

Parcipatory forest management programs

The Government of Nepal has recognized

that parcipatory forest management

programs will directly contribute to carbon

sequestraon. Community forestry,

leasehold forestry, and collaborave forest

management have been successfully

implemented in Nepal and have received


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domesc and internaonal recognion.

The parcipatory forest management

programs, parcularly in communityforestry, have resulted in both poverty

alleviaon and reduced GHG emissions.

2.4.3. CleanEnergyStrategies

The 2006 Rural Energy Policy denes Rural

Energy as energy that is environmentally

friendly and used by rural households,

such as micro and mini hydro, solar, wind

and biomass energy. These are all forms ofrenewable energy. A naonal strategy to

establish a renewable energy fund at the

central level to mobilize nancial resources

from various sources is underway. It is

planned to expand the exisng Rural

Energy Fund under the Alternave Energy

Promoon Center (AEPC) into a Central

Rural Energy Fund to develop, expand, and

promote rural energy technologies and

assist in rural electricaon.

Clean Energy Iniaves within CDM

projects

Nepal has raised revenue worth Rs.43.4

million (USD 967,000) from two biogas

projects, which have been approved by the

execuve board of the Clean Development

Mechanism (CDM) under the Kyoto

Protocol of the UNFCCC. Both projects

involved AEPC as the project enty and the

Community Development Carbon Fund of

the World Bank.

2.4.4. Naonal Strategy for Disaster

RiskManagement

The government developed a naonal

strategy for disaster risk management

called the Naonal Strategy for Disaster

Risk Management (NSDRM) in 2009, which

recommended the creaon of a naonal

disaster preparedness agency, the sengup of a naonwide early warning system and

invesng in weather predicon research.

Government subsequently launched the

Nepal Disaster Risk Reducon Consorum

(NRRC), which brings together nancial

instuons and development partners

with government. Based on government

priories and discussions within mul-

stakeholder groups, the Consorum

idened ve areas for immediate

disaster risk management in Nepal: (i)

school and hospital safety; (ii) emergency

preparedness and response capacity; (iii)

ood management in the Koshi river basin;

(iv) integrated community based disaster

risk reducon/management; and (v)

policy/instuonal support for disaster risk

management. The esmated total budget

of these programs is US $147 million, with

most acvies planned to be supported

through internaonal nancing.

2.4.5. TheNAPAProcess

The government prepared its Naonal

Adaptaon Programme of Acon (NAPA)

in September 2010. The NAPA recognized

six themac areas: Agriculture and

Food Security; Forests and Biodiversity;

Water Resources and Energy; Climate-

induced Disasters; Public Health; and

Urban Selements / Infrastructure as key

areas for intervenon. The respecve

line ministries led the draing process,

facilitated by the Ministry of Environment.

Signicant co-nancing was mobilised from

DFID, DANIDA and UNDP to supplement

funding from GEF to prepare the NAPA. In

addion, to the USD 200,000 grant from

GEF (under the Least Developed Countries


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15

Nepal needs to manage its substanal

climate risks and chart a climate resilient

growth path.

Two principles of acon are highlighted in

the program documentaon: (i) The PPCR

will complement, yet go beyond, currently

available adaptaon nancing in providing

nance for programmac approaches to

upstream climate resilience in development

planning, core development policies and

strategies; and (ii) the PPCR aims for an

equal eort from all development partnersto cooperate, engage in dialogue, and align

behind this strategic approach as a common

plaorm (hp://www.ppcrnepal.gov.np/

index.html).

The program is expected to consist of ve

components and will run inially for four

years:

1. Building Climate Resilience of

Watersheds in Mountain Eco-Regions.(USD 41 million3). This component

will address the problem of access to

freshwater resources by communies in

mountain ecosystems. The Department

of Soil Conservaon and Watershed

Management (DSCWM) of the Ministry

of Forest and Soil Conservaon (MoFSC)

will be the Projects execung agency. A

sector approach is envisaged to provide

the required exibility to address sub-

watershed specic intervenons.

2. Building Resilience to Climate-Related

Hazards. (USD 41 million). The second

component will address the priority risk

of oods and droughts that undermine

economic growth and poverty

alleviaon in Nepal. The Ministry of

Agriculture and Cooperaves and the

Ministry of Environment/Department

of Hydrology and Meteorology will

be the co-lead agencies for this

component.

3. Mainstreaming Climate Change Risk

Management in Development. (USD 10

million). This component will facilitate

the integraon of climate change

risk management into development

planning and pracces. The Ministry of

Environment will be the lead agency.

4. Building Climate Resilient Communies

through Private Sector Parcipaon.

(USD 2.7 million grant; USD 10 million

loan). The fourth component will

provide support to the private sector

in a number of climate vulnerable

producve sectors, including

agriculture and energy. It will be

administered through the IFC.

5. Enhancing Climate Resilience of

Endangered Species. (USD 5 million).

A specic component will address the

risks of climate variability and change

on the habitats of endangered wildlife

species. The Ministry of Forests and

Soil Conservaon will be the lead

agency.

Under the PPCR, each SPCR program

will follow the investment policies andprocedures of the MDB administering

each component, including its duciary

standards and environmental and

social safeguards. For the Nepal SPCR,

three MDBs will be involved: the World

Bank (components 2 and 5); the Asian

Development Bank (component 1 and 3);

and the Internaonal Finance Corporaon

(component 4).

3 Funding amounts or each component are those indicated in the SPCR document. However, the PPCR sub-committee subsequentlyendorsed a total o USD 86 million in nancing and so allocations or each component will be less.


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18

3.1 Introducon

There are a wealth of instuons that have

an interest in climate change-related issues.

This study has idened ten government

ministries where climate change is now a

policy concern, with dedicated sta and

new instuonal structures being put inplace. The situaon is similar in naonal

civil society organisaons and their

counterpart internaonal NGOs. The same

applies also to development partners,

where climate change has been added to

the job descripon of advisory sta. The

following secon details the instuonal

arrangements that exist and also those

that are planned.

3.2 Naonalinstuonalarrangementsforclimate

change

3.2.1 ParliamentaryCommiees

Two commiees within the naonal

legislature hold remits that address climate

change issues. The rst is the commiee

on Natural Resources, Economic Rights and

Revenue Sharing, referred to in the previous

chapter. This Commiee has 43 members.

The ex-oce members of this commieeinclude the Prime Minister, together with

the Ministers of Forests, Water Resources,

Land Reform and Agriculture (but not

Environment). Most importantly, this

commiee has recommended that climate

change be included in the forthcoming

New Constuon. A second parliamentary

commiee is the Development Commiee.

This themac commiee provides guidance

to line ministries, including the Ministry of

Environment (MoE), and has the remit to

monitor and evaluate the performances

of ministries. In terms of instuonal

arrangements, it is a statutory commiee of

parliamentarians, with its own secretariat

and it can draw on technical support from

line ministries and other instuons, as

and when needed. This commiee does

not appear to have given aenon to

the MoE to-date. There is a case for this

ministry to undergo parliamentary review

as it adapts as an instuon to take on the

major new naonal policy theme that is

climate change.

3.2.2 GovernmentAdvisoryBodythe

ClimateChangeCouncil(CCC)

Immediately prior to the 2009 UNFCCC

Conference of the Pares (COP 15)in Copenhagen, a Climate Change

Council (CCC) was constuted under

the Chairmanship of the Rt. Hon. Prime

Minister to develop climate change as a

major theme of the naonal development

agenda in Nepal. This is now the highest

advisory body dedicated to climate change

and connues to be chaired by the Rt.

Hon. Prime Minister. Its task is to provide

high-level policy and strategic oversight, to

coordinate nancial and technical supportto climate change-related programs and

projects, as well as securing measures

to benet from climate change-related

internaonal negoaons and decisions.

Since its establishment in July 2009,

the CCC has convened seven meengs,

demonstrang a strong policy commitment

to climate change. There are 26 members

on the council, including eleven ministers

and eight technical experts nominated

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by the government. The Secretary of the

MoE is the Secretary to the Council. Key

decisions already made by the CCC includethe endorsement of the NAPA and the

2011 climate change policy.

3.2.3 GovernmentConsultaveBody-

the Mul-sectoral Climate

ChangeIniavesCoordinaon

Commiee(MCCICC)

This is a naonal body created to coordinate

acon on naonal climate change-related

acvies and collaborave programs with

development partners. The MCCICC ishoused at the MoE and has representaves

from government ministries, naonal

instuons, internaonal and naonal

NGOs, academia, the private sector and

donors. All the NAPA themac working

group coordinators (Agriculture, Energy,

Forests, Health, Physical Planning, and

Home Aairs) sit on this commiee. Since

its formaon in 2009, the Commiee has

met ve mes (noceably, less oen than

the CCC). Its main aim is to strengthen mul-stakeholder collaboraon in responding

to climate change. It also has the task of

facilitang strategic nancing by providing

a venue where needs are idened,

arculated, and taken into account in the

formulaon of nancing strategies by the

government and its development partners.

The Climate Change Management Division

of the MoE acts as the Secretariat of this

Commiee. It might be expected for a

naonal consultave body of this kind tohold meengs on a regular basis and work

to a set agenda. To-date, this appears not

to be the case.

3.2.4 NaonalClimateChangeFocal

PointtheMoE

The MoE has the naonal mandate to

formulate, implement, monitor and

evaluate policy, plans, and programs on

environment, science and technology, and

climate change. This is a very considerable

agenda. It is also the Naonal Focal Point forthe UN Framework Convenon on Climate

Change (UNFCCC). The ministry consists

of three divisions: environment, climate

change management, and planning,

evaluaon and administraon. There are

11 sub-divisions within the ministry, three

of which are within the Climate Change

Management Division. The ministry has

53 sta posts. The ministry is a relavely

small and newly created instuon, with

no presence outside its administraveheadquarters in Kathmandu. It is currently

working out to how to increase its capacity

so that it can coordinate and implement

climate change policies at the sub-naonal

level.

The Climate Change Management Division

of MoE is meant to coordinate all climate

change-related projects implemented

by government, donors, Mullateral

Development Banks and other agencies.

In addion, there are plans to establish aproject management unit with support

from climate change-related projects to

oversee externally nanced iniaves

such as the SPCR (see previous chapter).

Although this would provide immediate

added capacity to the current structure,

a longer-term opon for channelling

and harmonising increased funding for

climate change-related acons needs to be

developed.

The Department of Hydrology andMeteorology (DHM) is a key department

for climate change-related acon under

the ministry. The DHM is the Naonal

Focal Point to the Inter-governmental

Panel on Climate Change. In addion,

the Alternave Energy Promoon Centre

(AEPC) is a semi-autonomous agency under

the ministry and is the naonal instuon

focused on developing and promong


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alternave energy technologies in Nepal.

The MoE has led several major naonal

responses in climate change in recent

years, including the formulaon of the

climate change policy, the preparaon and

endorsement of the NAPA, and establishing

and facilitang both the CCC and MCICC.

In the case of instuonal reform, MoE

is in the process of further examining its

current structure, whilst at the same me

it oversees the development of major

externally supported iniaves such as the

SPCR, the LAPA and the SREP programs.

3.2.5 TheNaonalPlanning

Commission

The Naonal Planning Commission

(NPC) advises government on all aspects

associated with periodic naonal plans,

programs, and projects. It also plays a

central role in advising ministries and

departments on foreign aid and is the

key naonal instuon for cross-sectoral

coordinaon of programs under various

internaonal convenons The NPC is aten member commission, chaired by the

Rt. Hon. Prime Minister. Specic themac

elds are assigned to each Member. The

NPC secretariat consists of ve divisions,

each headed by a Joint Secretary. The total

sta complement at NPC is 152.

The NPC is responsible to screen

development plans and programs

and, since 2011, has had the added

responsibility to ensure that such plans

and programs are climate resilient. To

address this laer objecve, the NPC

now has a climate-resilient planning tool

in place. In the course of mainstreaming

climate change in government programs

and projects, the NPC led the incorporaon

of climate responsive program acvies

within the TYP. As a result of the TYP, line

ministries are beginning to incorporate

climate change-related acvies in their

annual plans and programs.

3.2.6 MinistryofFinance

The programs and budgets for climate

change-related acvies prepared by

sector ministries such as Environment,

Forests, Agriculture, Irrigaon, Energy and

Local Development, are endorsed by the

Naonal Planning Commission, and then

the associated budgets are submied to

the Ministry of Finance. These budgets

are then reected in the spending plans of

each sector ministry.

The Ministry of Finance has nine divisions

including a Foreign Aid Co-ordinaon

Division and a Budget and Program

Division. The Budget and Program Division

aims to achieve eciency of the allocated

budget by strengthening project screening,

raonalizing expenditure, and introducing

performance-based allocaon within a

mul-year funding system (the medium

term expenditure framework) so that

core projects do not go under-funded.The Ministry of Finance produces the

government Red Book, in which program

and operaonal budgets for each Ministry

and projects are shown. In addion, the

ministry has experience in developing both

a gender responsive budget and a pro-

poor budget through the development of

a set of indicators by which line items of

the naonal budget are classied. This

experience has direct relevance for the

possible coding of climate change acvies.

3.3 Othergovernment

ministries

3.3.1 MinistryofForestsandSoil

Conservaon

The Ministry of Forests and Soil

Conservaon (MoFSC) is the sector

ministry with the remit to formulate and


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implement policy, plans, and programs

on forests, the natural environment and

biodiversity. It is also responsible for themanagement of protected areas. The

ministry has ve headquarter divisions and

ve implemenng departments, which

have naonwide coverage. The ministry

has a sta complement of approximately

9,500, of which 7,300 are District Forest

Oce sta.

The MoFSC is also the lead naonal

instuon for REDD (reducing emissions

from deforestaon and forest degradaon)

acvies in Nepal. A mul-sectoral, mul-stakeholder coordinang commiee has

been established as the apex body for

REDD policy development in the Ministry

of Forests, chaired by the Minister. A

REDD Working Group (RWG), under the

leadership of the Secretary, Ministry of

Forests, is also funconal. The RWG is

made of representaves from government,

indigenous peoples groups, community

forest user groups, the private sector and

development partners. Within the ministry,a technical REDD cell has been established

to coordinate the naonal REDD-Readiness

process (Figure 3).

The REDD Cell is led by a Joint Secretary and

has three secons. The Policy and Program

Development secon is in charge of the

assessment of policies and the design and

monitoring of forestry programs related

to REDD and climate change, including

developing extension and capacity building

programs and acvies. This secon alsoprovides back-up support to the Ministry

of Forests with regard to the internaonal

negoaon process. A second secon,

the Carbon Accounng and MRV Secon

is responsible for the technical aspects

associated with REDD, such as establishing

and implemenng the deforestaon and

forest degradaon reference scenarios,

as well as the monitoring and vericaon

system for REDD implementaon. The

third secon, the Outreach and Payment

for Environmental Services secon,is responsible for implemenng pilot

acvies. It is also in charge of the

documentaon and disseminaon of

REDD-related pilot projects and providing

informaon for both the Policy and Program

Development and the Carbon Accounng

and MRV secons. Addionally, this secon

is responsible for the implementaon and

delivery of extension and capacity building

acvies for dierent stakeholders,

including government, civil society and theprivate sector.

Figure 3: Instuonal arrangements for

theimplementaonofREDDprograms

3.3.2 MinistryofAgricultureand

Cooperaves

The Ministry of Agriculture and

Cooperaves focuses on measures to

increase agricultural producon and

producvity. To secure this goal the

ministry formulates and implements

agricultural and cooperave dev

Documents

Climate Public Expenditure